Problem 9-22 (Algo) Variance Analysis in a Hospital [LO9-4, LO9-5, LO9-6] John Fleming. Chief administrator for Valley View Hospital, is concerned about the costs for-tests in the hospial's lab, Charges for lab tests are consistently higher at Valley View than at other hospitals and have resulted in many complaints. Also, because of strict regulations on amounts reimbursed for lab tests, payments received from insurance companies and governmental units have not been high enough to cover iab costs. Mr. Fleming has asked you to evaluate costs in the hospital's lab for the past month. The following information is avalable: a. Two types of tests are performed in the lab-blood tests and smears. During the past month, 200 blood tests and 2,000 smears were performed in the lab. b. Small glass plates are used in both types of tests. During the past month, the hospat purchased 10.000 plates at a cost of $32.900. 1000 of these plates were unused at the end of the month, no plates were on hand at the beginning of the month c. During the past month, 1,000 hours of labor time were recorded in the lab at a cost of $10,300 d The lab's variable ovethead cost last month totaled $6.600. Valley View Hospital has never used standard costs. By searching industry literature, however, you have determined the following natoonwide averages for hospital labs: Phates. Three plates are required per lab test. These plates cost 53.50 each and are disposed of after the test is completed. Labor. Each blood test should require 0.6 hours to complete, and each smear should require 0,30 hours to complete. The average cost of this lab time is $1100 per hour Overhead Overhead cost is based on direct labor-hours. The average rate for varlable overhead is 5610 per hour Required: 1. Compute a materials price variance for the plates purchased last month and a materials quantity variarce for the plates used last. inonth. 2. For tabor cost in the lab: a Compute a labor rate variance and a babor efliciency variance. b. In most hospitals, one-half of the workers in the lab are senior technicians and one-half are assistants. in an effort to reduce costs, Valiey View Hospital employs only one-fourth senior technieians and thee-fouths assistants. Would you recommend that this policy be continued? 3.a. Compute the variable oveihead rate and efficiency vatiances. Plates Three plates are required per lab test. These plates cost $3.50 each and are disposed of after the test is completed labor. Each blood test should require 06 hours to complete, and each smear should require 0,30 hours to complete. The average cost of this lab time is $11.00 per hour. Overhead Overhead cost is based on direct labor hours. The average rate for variable overhead is $610 per hour Required: 1. Compute a materials price variance for the plates purchased last month and a materials quantity variance for the plates used last month 2. For labor cost in the lab: a. Compute a labor rate variance and a labor efficiency variance b In most hospitals, one half of the workers in the lab are senior technicians and one-half are assistants. In an effort to reduce costs. Valley View Hospital employs only one-fourth senior technicians and three-fourths assistants. Would you recommend that this policy be continued? 3-a. Compute the variable overhead rate and efficiency variances: 3-b. Is there any relation befween the variable overhead efficiency variance and the labor etficiency vanance? Complete this question by entering your answers in the tabs below. Compute a materials price variance for the plates purchased last month and a materials quantity variance for the plates used last month. (Indicate the effect of each variance by selecting "F" for favorable, "U* "for unfavorable, and "None" for no effect. (Le, rero variance) Input all amounts as positive values.)
